GBP/USD 5M
The GBP/USD currency pair traded quite well last Friday, except for one thing. We will analyze it later. In the meantime, take note that last Friday's movements were smooth and easy to deal with. Unfortunately, few signals were generated, and they were far from the most accurate and clear. In addition, quite a lot of reports were published during the day, which, although not strongly, influenced the movement of the pound/dollar pair. The first buy signal was formed at the beginning of the European session, but it was not uncommonly inaccurate. Quotes traded directly "at the level" of 1.4181 for about an hour, which is also located near the level of 1.4179. Thus, in the end, of course, we realized that a buy signal was formed there, but we would recommend filtering out such signals. Moreover, it was formed between two British reports. A retail sales report for April came out, which exceeded the forecasted values. Afterwards, data on business activity in the services and manufacturing sectors for May came out, which also exceeded analysts' forecasts. Thus, the pound received support from the market twice, but ultimately failed to reach the closest extremum level of 1.4240. Let us repeat that it was better not to process this signal, which was indistinct and between two reports. The second signal for the British pound was formed during the US trading session - the price surpassed the level of 1.4181, however, it was at this time that US reports started to come out, so this signal would be best filtered out. Although it was very accurate and did not raise any doubts. Subsequently, the quotes did not reach the nearest target either, nevertheless, a short position could still be manually closed for profit. But again, it would be better to filter this signal too. The US reports on business activity in the services and manufacturing sectors also turned out to be quite strong, so the dollar received market support here.
Overview of the EUR/USD pair. May 24. Christine Lagarde cooled the fervor of the bulls, but hardly for long.
Overview of the GBP/USD pair. May 24. Is the pound on the verge of collapse? Or just a couple of unsuccessful attempts to overcome the 42nd level?
GBP/USD 1H
The British pound started a new round within the ongoing upward trend on the hourly timeframe, which continues to be supported by the upward trend line. The price has fallen below the Kijun-sen line at the moment, so the decline may continue to the trend line on Monday. The "moment of truth" for the pair will come near this line. In our fundamental articles, we said that the technical picture on the 4-hour timeframe looks like the pair is about to break down. Therefore, surpassing the trend line will further increase the likelihood of the pound's decline. We continue to draw your attention to the most important levels and lines and trade from them: 1.4080, 1.4181 and 1.4240. Senkou Span B (1.4039) and Kijun-sen (1.4158) lines can also be signal sources. You are advised to set the Stop Loss level at breakeven when the price passes in the right direction by 20 points. The Ichimoku indicator lines can move during the day, which should be taken into account when looking for trading signals. No major reports set to be released in the UK on Monday, and no major events at all. However, there is a feeling that the "moment of truth" is really brewing for the pound, so we recommend that you be very careful. Recall that the absence of important events does not mean that the pair will stand in one place all day. The calendar of macroeconomic events for the US is also empty today.
We also recommend that you familiarize yourself with the forecast and trading signals for the EUR/USD pair.
COT report
The GBP/USD pair fell by 10 points during the last reporting week (May 11-17). In general, the pound continues to rise in price, which can clearly be seen in the chart above. Major players have resumed building up long positions since about December 2020. But at the same time, even according to Commitment of Traders (COT) reports, third-party global factors are clearly visible, which also support the pound. See for yourself. Until last December, when the upward trend in the pound continued, commercial and non-commercial traders did not really even know what to do with the pound. At that time, we recall, it was completely unclear how Brexit would end up and whether there would be a trade deal, and what awaits the UK in general. The red and green lines of the first indicator constantly crossed, which indicates the absence of a trend. But the pound was still growing. Therefore, even from this point of view, there is a serious imbalance in the money supply of Britain and the United States. Otherwise, the picture is as follows: neither the big players, nor the small ones bought the pound, but it grew anyway. It doesn't work that way. If market participants did not buy the pound, then it could grow only due to non-market factors, in particular, the intervention of the Federal Reserve and the Bank of England. Now the COT reports show that professional traders have started to buy the pound again, but they are not doing it very zealously. Rather, they try to simply follow the trend that is being formed without their much involvement. For example, a group of non-commercial traders closed 3,800 Buy contracts (longs) and 1,500 Sell contracts (shorts) during the reporting week. Thus, the net position for this group has decreased, which means that the bullish sentiment is weakening. It is this indication, not that the bearish mood has strengthened. The bears continue to rest now.
Explanations for the chart:
Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels.
Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one.
Support and resistance areas are areas from which the price has repeatedly rebounded off.
Yellow lines are trend lines, trend channels and any other technical patterns.
Indicator 1 on the COT charts is the size of the net position of each category of traders.
Indicator 2 on the COT charts is the size of the net position for the "non-commercial" group.
